Academic journal article Academy of Accounting and Financial Studies Journal

The Negative Effect of the Marriage Penalty Tax on American Society

Academic journal article Academy of Accounting and Financial Studies Journal

The Negative Effect of the Marriage Penalty Tax on American Society

Article excerpt


The marriage penalty tax (MPT) has been a topic of considerable discussion and debate by politicians, academicians, researchers, legislators, and, of course, individual taxpayers ever since Congress enacted the 'married filing jointly' status in 1913. MPT occurs when the total tax liability incurred by a married couple on their combined income exceeds the amount owed had they filed as separate/single individuals. To engender the public trust, tax policy must be both fair and equitable. Policy makers must not only consider equity but also political and social implications as well in the formulation and subsequent modification of tax law.

The objective of this study is to investigate empirically the impact of changes in tax law to determine whether, in fact, legislation truly accomplishes the intentions of Congress and the President. An important caveat in this regard is that Presidential and Congressional intentions, like tax laws, are subject to continual change as a result of changes in the political party that controls the White House and Congress. In 2006, control of Congress switched from Republican to Democratic control (Cook 2006).

To fully evaluate the impact of the new tax law, its distributional effects on each income class of taxpayers must be accurately identified. The results of this study will assist policy makers and tax researchers in assessing the net impact of changes in tax policy on income redistribution regarding MPT in the U.S. We extend previous MPT literature by empirically assessing the impact of changes in tax law on MPT in an attempt to determine whether the higher tax burden on married couples is reduced or eliminated. Further, the effects on and consequences of MPT on society as a whole are considered.

On June 7, 2001, President Bush signed into law The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA 2001) asserting that, among other changes, this Act was intended to reduce MPT. Relief was administered in two forms--the phase-in of an increase in the standard deduction for married couples and expansion of the income subject to the 15 percent rate to an amount equal to twice that of single taxpayers. Subsequently, the phase-in schedule for the increase in the standard deduction was delayed to 2005 (at 174% of the single standard deduction) and gradually increasing to 190% in 2008. The expanded 15% rate bracket for married couples filing joint returns increased from 180% of the

single bracket in 2005 and to 200% in 2008.

On May 28, 2003, in an effort to spur a lagging economy, President Bush signed the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA 2003) into law. JGTRRA 2003 accelerated many of the provisions of EGTRRA 2001, increased the childcare tax credit, temporarily doubled the standard deduction for married couples, and attempted to address the inequity of MPT. In an address to the Nation, President George W. Bush stated: "My tax cut plan is not just about productivity, it is about people. Economics is more than narrow interests or organized envy. A tax plan must apply market principles to the public interest. And my plan sets out to make life better for average men, women, and children. The current tax code is full of inequities. Many single moms face higher marginal tax rates than the wealthy. Couples frequently face a higher tax burden after they marry. High marginal tax rates act as a tollgate, limiting the access of low and moderate-income earners to the middle class. The current tax code frequently taxes couples more after they get married. This marriage tax contradicts our values and any reasonable sense of fairness" [emphasis added] (White House 2003).

According to Republican Representative Nancy Johnson of Connecticut, the MPT is especially onerous to women. Representative Johnson said: "I'll tell you our tax code and the penalty that it levies on married couples is not only cruel and unusual but it strikes at the dignity of women" (PBS 2000). …

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